Western Theories And Policies Of Unemployment Before 'Keynesian Revolution'

Employment or unemployment is a crucial problem to both an individual and a society. For an individual, employment is both his means of subsistence and an important way for his self realization. For a society, a society with high rate of unemployment is a society with seriously waste resources, multiple social problems and difficulty to remain stable. Unemployment has become the most serious political and economic problem puzzled all countries. Nowadays, various countries are trying to explore and solve this problem, to promote economic growth and social development. To China, such a country with most resourceful labor force, the problem of employment is extraordinarily important.This thesis, making use of available Chinese and Western literature, examines western theories and policies of employment before'Keynesian Revolution', with the hope of comprehensively and systematically demonstrating the evolution of western theories and policies of employment in this long historical period and finding their implications for China's theoretical research and policies of employment.Chapter 1 --Introduction--suggests the significance of studying Western theories and policies of employment as well as the reason why to examine western theories and policies of employment before'Keynesian Revolution'. Theoretically, one reason for the research of the theories and policies of employment before the Keynesian Revolution is lack of such kind of research, both home and abroad. Another reason for this research is that since1960s, there have been sea changes in the Western economies and economics, theories and policies of unemployment have been back to those before the'Keynesian Revolution'. This research will be helpful to understand the present state of theories and policies and predict their future. Practically, China is a developing country, the level of its development is comparable to the level of some stage of western economies of its past. The theories and policies of unemployment of past may be more relevant than some contemporary ones.Chapter 2 surveys western theories and policies of employment in the pre-industrial period. As a period of history of economic thought at large, the pre-industrial period consists of several historical periods, including the ancient, the middle age, and the period after the middle age but before the industrial revolution. In the pre-industrial period, unemployment in the modern sense did not exist, either as a phenomenon or as a conception. In this period, unemployment expressed itself basically in two forms: the Malthusian overpopulation and seasonal idleness of agricultural and some nonagricultural labor force. The theoretical analysis of employment was fragmented, treating unemployment as a part of the population and poverty problem. There was no systematic and deep analysis about the causes and types of unemployment. Public attitude and polices toward unemployment evolves: in the beginning, unemployment was seen as the outcome of the idleness and incapacities of the unemployed, unemployment as well as its outcome—poverty, begging and so on, was prohibited and punished; gradually, under the influence of the Christianity, the unemployed was treated as the subject of charity and relief. In this period, the relief of the poor experienced two stages--municipal relief and workhouse relief. They are both unsuccessful in general.Chapter 3 discusses the influence of industrialization as well as the changes in western theories and policies. During late 18th century, western societies experienced significant economic and social upheavals. A series of important events --industrialization, the French Revolution and population growth and so on, changed the character of western society and the way of thinking of economists. Economy was seen as a process of interaction of various links. Political economy became a separate scholarly subject. The problem of unemployment was stripped off from population and poverty problem. People become aware of the influence of institutions on unemployment. However, the mainstream economic thinking in this period, i.e., classical political economy, stressed natural order and the harmony of interests, advocated the policy of laissez faire. Unemployment and wage rate was still seen as the problems beyond the control of people. Based on this perspective, public policies did not change much regarding unemployment, still took relief and some form of punishment as main measures. During this period, the critic of classical political economy, such as Sismondi, Louis Blanc and Buret, saw more clearly the special character of the unemployment in the context of industrialization and the development of market economy. However, although Sismondi, a petty bourgeoisie and romantic economist, attacked violently the economic and social foundation which caused unemployment, he can not think of any practical measures to deal with this problem. Meanwhile, Louis Blanc and Buret, as the thinkers of utopian socialism, designed the alternative based on public or collective community, but those design failed to work for many reasons.Chapter 4—'The discovery of unemployment'-- discussed the latter half of the 19th century theories of unemployment, especially the results of some empirical research. In the latter half of the 19th century, during the development of laisser-faire capitalism, railway construction and other factors promoted further economic growth, opened up a period of time that the living standard of wage workers generally improved, it is also increased the prestige of classical political economy. Although the marginalist revolution changed the face of economics, marginal utility theory of value became the new theoretical basis of economics, but in the attitude and policy towards unemployment, the neo-classical economics and classical political economy can be traced to the same origin. Moreover, the micro-perspective of neo-classical economics seems to be more detrimental to the analysis of the unemployed. Unemployment seems not a serious problem in practice. It is only temporary even if the phenomenon is periodic. The victim is largely responsible for their own situation. During this period, only some non-mainstream scholars such as Henry George and John Hobson paid attention to the coexistence of prosperity and poverty paradox. They were concerned about unemployment, and put forward the corresponding policy proposals, though not put them into practice. During this period, Booth's and other empirical studies were more noticeable. These authoritative, objective and awestruck empirical studies provided detailed data on unemployment, laid the empirical basis for public policy. In this sense, this period is "the discovery of unemployment" period. During this period, both theoretical research and empirical studies have identified unemployment or some degree of unemployment, is the inevitable, even indispensable phenomena of the capitalist or market economy.Chapter 5 investigated the unemployment theory and policy from the early 20th century to the Great Depression. Since the 20th century, unemployment was seen as a problem of industry. There are two views towards the unemployment problem: the core of the first view is to prevent, at least to reduce unemployment; the other is just trying to provide some support for the unemployed. The former claimed to establish the so-called labor exchange, which will bring the workers of no work and potential employers together; to re-allocate the surplus labor; to reduce seasonal fluctuations in some industries or coordinate activities in different industries of the peak and trough, so that workers can move from one industry to another when they have free time; to adjust the pace of government purchases and construction projects, in order to increase employment in slack period. The latter stressed that job creation for the unemployed and the unemployment insurance (co-financed by workers, employers and the nation). Both of them were put into practice in different forms.Chapter 6 survey and criticize the western theories and policies of unemployment during the Great Depression. In the 1930s, the western economy experienced the Great Depression of five years. Unemployment in an unprecedented scale became the main and the most enduring features of this period. During the Great Depression, classical school still insisted that the role of the market should be maintained and against government intervention in the economy. The school of under-consumption and the Keynesians found the limitations of market economy to achieve full employment and argued that the government should take actions to alleviate the unemployment problem. Although The Keynesian Revolution has not yet occurred, most western countries adopted the policies that Malthus, Hobson and Keynes advocated. In theory, Kahn's multiplier theory, Keynesian theory of effective demand has been formed. The interaction between theories and practices eventually caused that Keynes published his"The General Theory of Employment, Interest and Money"in 1936.The final chapter summarizes the full text. Throughout this long period of history, we can see that the research on unemployment has undergone many changes. The unemployment evolved from a pre-industrial problem to an industrial problem; from a personal issue to a social problem; from a supply problem to a demand problem. The solution also changed from municipal relief, community relief to a state responsibility: to implement the public works and unemployment insurance to prevent unemployment as well as relieve the people who are unemployed.However, western theories, in this long historical period, still have a lot of defects. Marx believed that the capitalism produced the industrial reserve army that the unemployed constitute the'a mass of human material always ready for exploitation'. Marx using his reserve army theory placed the issue of unemployment into a new context. The earlier author, either attributed the unemployed to laziness or incompetence of idle persons, society or fate, all regard this problem as an abnormal state. Marx argued that unemployment is perfectly normal and necessary aspect of capitalism. In the view of Marx, the role of the reserve army in the prosperity period is self-evident. If not so, how can economy grow? Indeed, the modern view that the growth is indispensable for the maintenance of full employment is the other side of Marxist point of view. Marx's ideas also had significant impact on later Western scholars.Finally, we provided preliminary answers to some interrelated questions such as'Is unemployment a demand or supply problem?''Is unemployment a personal problem or institutional problem?'and'Is unemployment a problem peculiar to the capitalist economic system, or the common problem of various systems?'...